Bitcoin Sentiment Hits Multi-Year Low, Signaling Potential Inflection Point

Matrixport’s analysis reveals a stark picture of market psychology. The firm’s proprietary Greed and Fear Index has fallen below zero on its 21-day average, a zone that in previous market cycles has appeared close to price floors. This reading, published on February 17, represents the most pessimistic sentiment in years. The model, which tracks changes in positioning and volatility, suggests that earlier instances of similar readings often occurred shortly before markets stabilized. Matrixport explicitly stated, “Given the cyclical relationship between sentiment and Bitcoin price action, the latest reading suggests the market may be approaching another inflection point.”

This sentiment is corroborated by other market indicators. Alternative.me’s widely followed Fear and Greed Index also dropped to its lowest level since 2019 earlier in the month, following a period where Bitcoin shed approximately $30,000 from its price in less than ten days. The convergence of these independent sentiment gauges paints a clear picture of pervasive fear among market participants, a condition that historically has often set the stage for a potential reversal.

The negative sentiment is reflected in tangible capital movements. According to data from Lookonchain, Bitcoin investment products recorded another week of significant outflows, with $380 million exiting in the last seven days. Leading the retreat were major institutional players. BlackRock’s IBIT product hemorrhaged 3,538 BTC, while Fidelity saw over 2,000 BTC, worth upwards of $143 million, withdrawn. These outflows represent a continuation of pressure from traditional finance channels into the crypto market.

The price action underscores the challenging environment. While BTC was trading around $68,000 at the time of the report, showing relative stability in a 24-hour window, the broader timeframe reveals deeper losses. Per data from CoinGlass, Bitcoin was down nearly 3% on the week, with a steeper 28% collapse over 30 days and a more than 40% decline across the past six months. This sustained downward pressure has clearly eroded investor confidence and fueled the extreme fear captured by the sentiment indices.

Beyond spot markets and sentiment, the derivatives landscape signals a broad reduction in risk appetite. Analyst Darkfost highlighted that open interest across major exchanges has been shrinking steadily since the market top in October 2025. Positions on Binance are down about 39%, with declines of approximately 33% on Bybit and 24% on BitMEX. This contraction in open interest indicates that investors are actively reducing their exposure, cutting risk, or being forced out through liquidations driven by ongoing volatility.

Darkfost explained this environment makes it “difficult to envision Bitcoin stabilizing sustainably and reigniting a bullish trend in the short term.” The shrinking derivatives market suggests a lack of conviction and capital waiting to deploy, which typically delays a sustained recovery. However, Matrixport offers a counterpoint to this near-term caution, noting that historically, such periods of extreme pessimism have often coincided with what it calls “attractive” entry periods for long-term investors, even if prices could drop further before any recovery begins.

The firm advises traders to sharpen their focus in preparation for “conditions that typically precede a meaningful rebound.” The current landscape, therefore, presents a paradox: clear signals of exhaustion and potential long-term opportunity, set against a backdrop of continued outflows, price declines, and a risk-averse derivatives market. The key question for investors is whether the extreme fear signaled by Matrixport and others truly marks an inflection point, or if the market requires further capitulation before a durable bottom is established.